They recently retired and were told they had to "cash out" within 60 days. So obviously that means rolling it to an IRA or whatever to stave off paying a giant tax bill.

I don't know much about 403(b)s but this is what they told me. They were both TRS (Teacher Retirement Services) accounts.

They heard incorrectly. They do not have to cash out if they retired.

One already did so it's a moot point. The other I'm not positive about.

I'm just trying to figure out if there is an IRA vehicle somewhere between a CD that pays dick and a 38/62 split fund that I would be able to convince two people I care about to invest in where they won't get raped by inflation/salesmen and will have a high level of liquidity.

I even logged in to show them my TR account and it's (relatively) healthy balance so they'd know I was invested in it as well, though more like an 85/15 split or something.

Call the SEC and inform them that someone committed financial fraud against an elderly person.

The other shouldn't do anything at all.

It sounds to me like it is a teacher pension with the option for pension (annuity) or lump sum. Pretty common in the public sector afaik.

Yes it's a teacher retirement. It's the state of Texas. I have a brochure they gave me I can read through and see what it says. I may have mis-spoke when I said they made her cash out. Both women may have opted to do so of their own volition. I just heard them both mention 60 days so I figured it was mandatory.

So this down payment stuff has me worried now. Should I basically be saving everything from now until 2 years from now to make a down payment? Like a $200k house would require a $40k downpayment (20% is the rule of thumb right?) That would take over a year to save for. And then I have my 16k student loan at 6.8% that I need to be able to snap-pay as well. I guess I can always fill my roth and use the $20k first time home buyers withdrawal if I need it, that way I'm not just locking down tens of thousands in a savings account

You should do that.

An IRA is a container. You can fill the container with a lot of different investments, if you wish. I don't see anything like a guaranteed investment contract at Vanguard, doubt it would pay much if they had one anyway. I would think a short term investment grade bond fund would be your best option, something like VFSTX.
You realize that Murphy's law states the moment you actually get them to commit money to the TR fund the market will go down precipitously, forever proving them right and you wrong, in their minds.

Why would you suggest she leave all her money in her TRS account that has high fees and a worse ROR than what she could get in a simple Vanguard TR account? And with immediate liquidity?

Not sure why this matters. As I said, one of them already cashed out. The other probably has, as well. I don't really think the gigantic TRS system of Texas is committing fraud against elderly people. And, why wouldn't they want to move it into an IRA?

Based on your debt, income, and life plans over the next 2 years... you should be saving like crazy. You can withdraw Contributions from your Roth IRA at any time, for any reason, tax and penalty-free. The first-time homebuyer's thing is regarding Earnings*. You are young so most of the money in your account is likely Contributions anyway. So rest assured, if you pump money into your Roth you have a great deal of access to it should you need it. The downside of course is not being able to replenish prior years' Contributions. Another downside would be your investment completely tanking and not being able to pull out much Contributions when you need them. But that goes without saying.

So let's say in 2 years your Roth balance is $37K. $30K Contributions, and $7K Earnings. You can pull out $30K at any time, for any reason, tax and penalty-free. If you wish to pull the $7K out you can look into the first-time homebuyer's exception.

VFSTX thanks. I'll look into it. I think I'm covered on the Murphy's Law thing, considering I can chart back to when I told her to put it in the market. I'm quite annoyed at the both of them, actually, and really don't care if they listen to me (even when they ask). They'd rather have a stranger talk them into putting their lump into a CD that pays 0.5% a year GUARANTEED* than a relative who wants to see them not get screwed out of their money (hey - eventually it might be willed to me!)

*To not beat inflation

What exactly are the fees, expected payments, ROR, etc.?

Have you even checked to see whether it is a pension or a 403(b)?

I would humbly offer that if you don't know these things down to the hundredth of a percent before opening your mouth, that you probably ought not be offering the relatives financial advice.

Typically lump sum payment offers are crap compared to pension payments.

Will you perish if you don't buy a house in two years? Do your student loans have a "pay in entirety upon receiving your first bill or we lop off one of your arms" clause?

The answers given earlier in the thread don't change because you are feeling worried. None of the money you are planning to spend on ANYTHING (paying down loans, down payment, car replacement, vacation, lunch, etc.) over the next few years should be in anything other than a savings account or CDs.

I don't know why you are being so abrasive. I'm not going to sit here and educate you on the inner workings of some TRS account. It has nothing to do with my original question, anyway. YOU are the one who said "she shouldn't do anything" meaning she should keep it in the TRS account, even though you know less about it than I do. Why should she keep it in there? Huh? What are the fees and rate of return? I'm telling you I think they both have/are cashing out whether they have to or not. You wanted me on the phone to the SEC earlier even though you seem to know jack **** about it.

I know what the targeted ROR is and whether or not it's a 403(b)

Hint: I mentioned it already itt.

Cool story bro. I don't even know wtf this is supposed to mean. Their plan gives 3 options. Each is a Partial Lump Sum Option (PLSO). One has a large lump/smaller annuity, one has a medium lump/medium annuity, the third option you may or may not be able to figure out, has a small lump/large annuity.

I've already done Present Value formulas for these to see what they are actually worth. (One lady's husband swore the larger annuity was best b/c he simply added up all the money and claimed it was better). I had to explain to her that you can't just add money in the future as if it's worth what it is today. I already said the option with the largest Lump is best, no matter how long she lives, assuming she doesn't stash the lump under her mattress.

And none of this has anything to do with my original question, which was looking for safe "guaranteed" options at Vanguard where they can stash a percentage of their money. Since 38% equities is apparently way too risky.

You "mentioned" quite a few things. Then, when asked about them, you mentioned that maybe you had misspoken and hadn't bothered to read even the pamphlet.

That is annoying. That is why I am being abrasive. That is why they won't listen to you.

The amount of the monthly payments? What is the lump sum offer?

You need to know these to the penny to make anything approaching a reasonable recommendation.

What assumptions of returns on the lump sum did you use?

Guaranteed "safe" options would include up to and including a savings account.

This process started a while back. The pamphlet isn't very informative. They gave it to me and I just looked at it again and recall flipping through it back then and it is mostly instructions for them. There is a rules link I just tried to read online but their link was broken.

They didn't stick their lump sum into the Vanguard account I suggested because I didn't read the pamphlet they gave me for TRS which doesn't really have anything to do with anything? OK.


Why the **** do you assume I don't know these? They gave me this information. Do you think I wasted time doing PV calcs with numbers I made up? I'm not going to tell you exact numbers - that's too personal, and frankly I don't like you in the hour or so I have known you.


They were offered 4 options. No lump (I'd forgotten about this mostly because lol no lump), and the 3 partial lumps. I had to make several assumptions. Variables were expected date of death as well as expected returns. I chose a 10, 15, and 20 year window. The benefit pays their spouse if they die so in all honesty I could have gone to 25 or 30 years but she said 20 would be fine. I also chose rates of 2%/5%/8%

So I had 4 Options, each with 3 different terms and 3 different rates of return, so I ended up spitting 36 Present Value numbers at them.

There were many ways to compare the numbers but when I took the average of the 9 PVs for each of the 4 options, they were all quite close. The worst option (no lump) was only about 3% less than the best option (largest lump). Which is good to know so even an uninformed person can randomly choose an option and know they aren't going to be screwed.

I have now officially spent way too much time talking to you. Good night.

What assumptions did you use in your PV calculations?

Show your work. No work for even a relative currently experiencing a severe brain hemorrhage to listen to you if you can't show the math.

If you need money within 2 years, the last thing you want to do is invest in the stock market. Use a combinations of online savings like Ally and 1-year, 2-year CDs.

i just feel bad about "wasting years" with my Roth IRA. Once the year passes i can never contribute for that year again, compound interest and all. im thinking about contributing for 2015 now and then contributing for 2016 in April 2017 all at once, I think that may be possible.

What is your future profession and future income?

+1

A-Rod,

If they really are all about equal as for as the annuity versus lump sum, then they should probably just do the largest annuity with survivor benefits. These are older people who seem to be risk averse and have so little knowledge about finances that they are asking someone else to help them. The largest annuity is by far the best option. It guarantees their financial well being and their spouses after their death and they will never lose sleep over money. Ever. If I were you, I would strongly suggest they do that.

I would keep renting and put a house down payment way down your list of priorities:
1. fund 401ks up to company match
2. pay off higher interest debt of 5% and then the one that becomes 6.8%
3. emergency fund of 3-6 months of expenses

huge gap

4. pay off lower interest rate debt
5. house down payment
6. max retirement accounts

I would also consider asking 'what should I do' over at bogleheads forums. You will get some very useful information there if you follow the guidelines for useful OPs. I would suggest the same to arod or anyone else seeking advice.

You can get a guaranteed 5% rate of return by paying off one loan and another guaranteed 6.8% rate of return by paying off the other.

Why would you want to pass up on such an opportunity in favor of opportunities that are not as good?

+1,000